Chinese Firms Facing State Scrutiny Own $25B of U.S. And European Real Estate
China’s regulatory crackdown on some of its biggest investment companies is continuing, and the government is now looking into four firms with huge real estate holdings in the U.S. and Europe.
Reports emerged this week that China’s state regulators have asked the country’s banks to provide details on loans to Dalian Wanda, Fosun, HNA and Anbang. According to reports, they want to find out how much debt these companies have used to fund massive acquisition sprees, and see if they are overleveraged and pose a threat to the financial system.
The four companies have a combined real estate and real estate-backed portfolio in North America and Europe of more than $25B, according to Real Capital Analytics, and have been among the largest buyers of offices, residential development schemes and hotels in New York, London, Chicago and beyond.
They have a major impact on the market. Here is what they own.
HNA has driven some of the biggest real estate deals in the U.S. over the past 18 months, and its Manhattan portfolio alone totals more than $3.5B, according to RCA. Just last month it completed the purchase of 245 Park Ave. from Brookfield for $2.2B in a highly leveraged deal — it used a $1.75B loan from a consortium of banks headed by JP Morgan to fund the purchase.
In 2016 it bought 33 South Sixty St. in Minneapolis for $315M; 123 Mission in San Francisco for $255M; and 850 Third Ave. in New York for $463M.
In London it bought 17 Columbus Courtyard in Canary Wharf for $188M in April 2016.
HNA’s biggest real estate deal was its purchase from Blackstone of a 25% stake in Hilton for $6.5B in October 2016. RCA data shows it also has direct hotel holdings of just shy of $1B.
The company was started by Chen Feng in 1993 and made much of its money in aviation before becoming more of an investment conglomerate.
Dalian Wanda is a real estate giant, and its founder, Wang Jianlin, is one of China’s richest people. But only a small fraction of its roughly $28B of directly owned real estate is outside of China. There is one intriguing recent deal — the day before the regulatory probe was announced it completed the purchase of a $605M development site in London where there is planning consent to build more than 1,800 high-end homes. There is a fruit and flower market on the site, which is called New Covent Garden Market. It owns another scheme next door where it is building 436 apartments and a Wanda Hotel.
Its major U.S. real estate includes the $1.2B One Beverly Hills scheme and the Wanda Vista Tower, a trio of residential towers, the tallest 361 meters/1,186 feet, in Chicago. Just a week ago Wanda secured a $700M construction loan from Chinese insurer Ping An there.
Wanda is better known in the U.S. for its asset-backed purchases in the world of leisure and entertainment. In 2012 it bought the AMC cinema chain, and supplemented this with the $1.2B purchase of U.K. chain Odeon in July 2016 and the $921M purchase of Nordic chain Nordic Cinema Group.
In 2016 it went from showing films overseas to making them with the £3.5B acquisition of Legendary Entertainment, which made the recent Christopher Nolan Batman trilogy. A $1B bid for Dick Clark Entertainment fell through, with the deal reported to have been blocked by regulators. It is also a major film producer and cinema owner in China.
It is investing $3.3B in French theme park and entertainment scheme EuropaCity. It owns a 20% stake in Spanish football team Atletico Madrid, and funded construction of its new stadium, named Wanda Metropolitano.
Fosun is probably better known in Europe than the U.S. and about $2B of its $9B of real estate is on the Old Continent, according to RCA. It bought a majority stake in European opportunity fund manager Resolution Property in 2015, and provided the equity for its latest fund, which will have up to €800M of equity to deploy. Its biggest acquisition in Europe is the former Hellinikon Airport, which it bought from the Greek state as part of a fire sale of assets for $1.3B in 2014. It is set to become a massive coastal holiday resort.
Fosun is dipping its toe into other troubled markets like Russia, where it has bought two Moscow office buildings for $220M this year. Last year it bought the Trinity Tower office building in London for $395M, which it will refurbish.
It has been relatively quiet in the U.S. since its bombastic debut acquisition, the $725M purchase of the former One Chase Manhattan Plaza in 2013. It also has an apartment development scheme at 15 East 30th St.
Anbang’s troubles and portfolio have grabbed headlines in the U.S. for a few years, as it has been on a huge U.S. acquisition spree, which included the $2B purchase of the Waldorf Astoria hotel from Hilton in February 2015, and the $6.5B purchase of Strategic Hotels & Resorts from Blackstone in September 2016.
Anbang has been a major buyer from Blackstone, also picking up around $950M of Dutch property from the company. In 2016 it abruptly pulled out of a bid to buy Starwood Hotels for $13B, and has been subject to constant reports of regulatory scrutiny since. Last week its chairman was reported to be under investigation by Chinese authorities.
